skip to Main Content

We can have full employment again in a green world

Last Saturday, the Weekend Australian, Rupert Murdoch’s daily national newspaper, had a relative Modern Monetary Theory (MMT) avalanche, with two core MMT-style articles published and two that were supportive rather than hostile. That tells you something about the way the world is shifting. I have received a bit of flack for publishing an Op-Ed piece in that newspaper from those who style themselves as Leftists. It is the same old argument – dealing with the devil. And the same old reply – if you want to influence policy then you have to talk to those who make policy. It is easy plotting revolutions over lunch. There has been a lot of groundwork laid over the last several months to bring people into the conversation. It is quiet stuff. Discreet. And as things unfold I will make some of the developments public. At present, all I can say is that I have a document before the Prime Minister today and there is a lot of behind-the-scenes workshops/briefings going on at state-level. And, while activists spend a lot of time ‘pressuring’ this person and that person on social media, the big shifts that are going on at present, including the publication of Noel Pearson’s piece and my article, are not being helped by aggressive social media confrontations. Sometimes it is better to work in a subtle way and exploit networks where they are available. That is not to say that activism to promote MMT is not appreciated and helpful. But we do need to pick our path. Anyway, a number of people asked me to publish my article here because they cannot get behind The Australian’s paywall. So here is the penultimate version which is a few hundred words longer than the actual article, which I cannot provide due to copyright restrictions. I also cannot provide Noel Pearson’s accompanying and complementary article but it was magnificent.

Spread the word ...
    Read More

    US labour market reverses direction but for how long?

    On July 2, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – June 2020 – which shows that the US labour market response to the relaxation of lockdown controls gained pace in due, although the question that remains is how long can the governors of the states allow the relaxation to continue given the alarming spread of disease. Already, nations such as Spain are returning to lockdown as their hospital systems become overwhelmed by the ‘second wave’ following easing. And US states such as Texas, Arizona and Florida are approaching the time when they will have to return to some form of lockdown given the health crisis that premature easing has created. The problem is that the lack of economic support from the Federal government makes those decisions difficult to take and extremely damaging for the unemployed. It is almost unbelievable that the Republican politicians are endorsing cutting unemployment support. But, in June, as the economy reopened, the payroll numbers improved as you would expect with a 4.8 million increase in jobs net) and the official unemployment rate rate falling to 11.1 per cent. The numbers filing for unemployment insurance are now falling but now top 49.2 million since March 7, 2020. A further 1.4 million filed in the week ending June 27, 2020. How far the recovery can go depends on two factors, both of which are biased negatively: (a) How many firms have gone broke in the lockdown? (b) Whether the US states will have to reverse their lockdown easing in the face of a rapid escalation of the virus in some of the more populace states. But I do not see appropriate policy responses in place. The US government should have guaranteed all incomes and introduced large-scale job creation programs and a Job Guarantee as an on-going safety net.

    Spread the word ...
      Read More

      The Weekend Quiz – July 4-5, 2020 – answers and discussion

      Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

      Spread the word ...
        Read More

        The Weekend Quiz – July 4-5, 2020

        Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

        Spread the word ...
          Read More

          Australian minimum wage case decision – a scandalous indictment of our system

          On June 19, 2020, Australia’s wage setting tribunal, the Fair Work Commission handed down its – Decision: Annual wage review – which saw the National Minimum Wage (NMW) rise by just 1.75 per cent per cent from July 1, 2020. However some of the flow-on increases (awards linked to the NMW), which would normally have been adjusted on the same date have been staggered (November 1, 2020 for Group 2 Awards and February 1, 2021 for Group 3 Awards). The new minimum wage will be $753.80 per week or $19.49 per hour (a measly 35 cents per hour extra). In terms of any inflation measure you want to choose, the FWC’s decision represents a real wage cut for the lowest paid workers (Group 1) and even larger cuts for the other Groups as a result of the staggered wage rises. There is certainly no joy for workers when the mindless pursuit of austerity by the federal government slows growth (before the pandemic), which the government’s own wage setting tribunal then uses as a pretext (the slow growth) to cut real wages. Meanwhile the major employer groups argued for zero nominal rise while enjoying growth in profits with rising productivity growth. A scandalous indictment of our system.

          Spread the word ...
            Read More

            MMTed Q&A – Episode 5

            Here is Episode 5 in our weekly MMTed Q&A series. And when you are done with the answers you can Zoom some mates and have a dance party to the music that follows. This week we further reduced the length of the Episode and focused on one big issue with a special guest.

            Spread the word ...
              Read More

              Apparently the government has no money but then has plenty

              Things are obviously getting desperate out there in financial media commentary land. If one could express written text in graphical terms then there are a number of financial journalists out there that look – like a rabbit caught in the headlights – that is in a state “of paralyzing surprise, fear, or bewilderment.” A good example of this increasingly observed syndrome is an article in The Australian newspaper today (June 30, 2020) by Adam Creighton – Never forget that governments have no money – it is always ours (subscription required). This sort of journalism is becoming an almost daily occurrence as it becomes obvious that capitalism is now on state life support systems and the extremities of government intervention are demonstrating very clearly what Modern Monetary Theory (MMT) economists have been saying – and the only ones that have been saying it – for 25 years or so. I often note that Japan has already pushed the fiscal and monetary policy parameters beyond the limits most countries have explored in peacetime and mainstream economists have systematically predicted various scales of disaster and have always been wrong. Now all countries are at extremes and still no fiscal disaster. But the mainstream mouthpieces – these financial journalists who seem to think the stuff they read in first-year text books from mainstream economics programs are in same way the basis for expertise and knowledge – are in advanced states of dissonance. Drivel follows.

              Spread the word ...
                Read More

                Governments should do everything possible to avoid recessions – yet they don’t

                In May 2020, the IMF published a new Working Paper (No 20/73) – Hysteresis and Business Cycles – which provides some insights into what happens during an economic cycle. The IMF are somewhat late to the party as they usually are. We have known about the concept and relevance of hysteresis since the 1980s. In terms of the academic work, I was one of the earliest contributors to the hysteresis literature in the world. I published several articles on the topic in the 1980s that came out of my PhD research as I was searching for solutions to the dominant view in the profession that the Phillips curve constraint prevented full employment from being sustained (the inflation impacts!). The lesson from this literature in part – especially in current times – is that governments should do everything possible to avoid recessions. The hysteresis notion tells us clearly that the future is path dependent. The longer and deeper the recession, the more damaging the consequences and the longer it takes to recover while enduring these elevated levels of misery. Organisations like the IMF have never embraced that sort of reasoning, until now it seems. They certainly didn’t act in this way during the Greek disaster. But, better late than never.

                Spread the word ...
                  Read More

                  The Weekend Quiz – June 27-28, 2020 – answers and discussion

                  Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

                  Spread the word ...
                    Read More

                    The Weekend Quiz – June 27-28, 2020

                    Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

                    Spread the word ...
                      Read More
                      Back To Top